Earlier this month, it was revealed that Apple CEO Tim Cook had secretly signed a $275 million deal with China back in 2016 in an effort to forge a closer alliance with the government. The deal means that Apple will contribute towards helping grow China economically and technologically, in return for gaining regulatory exemptions and concessions.
According to a new report, Apple has increased its reliance on Chinese supply chain partners, including Luxshare, meaning its main Taiwanese supplier Foxconn lost some of its iPhone business.
Apple shifted orders from Foxconn to Luxshare to assist $275B China deal
The new details follow a report from earlier this month revealing an alleged agreement Tim Cook made with the Chinese government to invest in local companies. The Information on Thursday revealed what some of those investments include.
For example, Apple has turned to more Chinese-based supply chain partners to keep up its end of the deal. The publication says this is Cook upholding his agreement to help Beijing expand its local technology industry.
For example, a year after the $275 billion deal was made, Apple tapped Luxshare to assemble AirPods effectively pulling orders from long-time iPhone assembler Foxconn which is based in Taiwan. This led to the end of Taiwanese-based companies dominating Apple’s assembly chain.
The report notes the deal with Luxshare marked a “turning point” for Apple and China since it raised the company’s status by placing it among Apple suppliers who assemble a finished product and also handle the packaging.
In response to the Chinese firm’s rise, Foxconn reportedly assembled a team to study the company. Over the course of the last decade, Apple has been sending its engineers to work with Chinese companies to help them learn how to build its products.
Apple is aware it needs to maintain a certain reputation in China, especially since the country is responsible for 20% of its business. It also is the largest market in the world for smartphones followed by India and the United States. The publication says the $275 billion investment deal between Apple and China is a way for the Cupertino tech giant to cut costs and “curry favor with Beijing.”
The $275 billion investment was agreed to take place over a span of five years, after which the deal would be optionally renewed should both parties agree. It will be interesting to see whether the expiration of this deal in the future could impact Apple’s footing in China.